The Department of Justice announced Thursday that the Indianapolis-based company would pay a $515 million criminal fine (the largest ever in a healthcare case and the largest criminal fine ever imposed on an individual corporation) and up to $800 million in a civil settlement with the federal government and the states. It will also forfeit assets of $100 million.

The settlement will resolve criminal and civil allegations that Lilly promoted Zyprexa (olanzapine) for uses not approved by the Food and Drug Administration, including treatment of dementia in elderly people.

In a plea agreement, the company has admitted its guilt to a misdemeanor charge. It also signed a civil settlement to resolve claims that by marketing the drug for off-label uses, it caused the submission of false payment claims to federal health insurance plans such as Medicaid, TRICARE and the Federal Employee Health Benefits Program.

Candy brands give consumers more ways to ‘trade up’

There’s no denying it — frugal is the new trend. Still, retailers continue to ask themselves just how much consumers are willing to give up to save a few dollars. And does it include premium chocolate?

Premium chocolate has been the star of the candy aisle for some time. Over the five-year period from 2003 to 2007, premium chocolate’s share of the total chocolate market has more than doubled from 7% to 18%. Curtis Vreeland, senior analyst for Packaged Pacts, predicted that share to reach 25% by 2012, despite sales values boosted by commodities price hikes and recessionary slippage in demand.

A recent report from Packaged Facts revealed that sales in the premium chocolate segment outpaced overall category sales in 2007, making it the engine that drove the chocolate category. Premium chocolate sales grew nearly 5% for the 52 weeks ended Oct. 5, 2008, according to Information Resources Inc.

According to information from Packaged Facts, premium products sold through food, drug and mass had an even more impressive performance. That trend has been fueled as more premium chocolate makers extend their distribution to the mass market. Now Lindt, Ghirardelli and Ferrero products are commonly found on drug store shelves.

Recently, more action has been coming from manufacturers of mass brands, who have been introducing their own “trade-up” brands. These not-quite-premium brands allow consumers to trade up within a familiar brand with a product that offers something above the traditional product. Mars recently introduced M&M Premiums, candies with shimmering finishes in exotic flavors that are merchandised in upright containers and retail for more than $3.

“Premiums offer great flavors and packaging and a glamorous image,” said Lisbeth Echeandia, VP trade marketing for Frey Enterprises, a consulting firm. “The packaging and image are neat, and M&M is a good name for a trade-up opportunity.”

“This new product captures the fashion, vibrancy and indulgence of premiumization, yet it retains the sense of colorful fun and unpretentiousness that the M&M’s brand has always stood for,” said Ryan Bowling, a spokesman for Mars Snackfood US.Bowling said Mars also has added a number of flavors and formats to its Dove brand, which is the top-selling premium chocolate brand in the United States. Dove Desserts, in bananas foster and tiramisu, were introduced in June. In the premium tablet collection, six new flavors were added, and packaging was changed to feature three individually wrapped pieces to “address consumers’ desire for portion control and shareability,” Bowling said.

On the heels of its Cacao Reserve and Starbucks brands, Hershey launched Bliss, individually wrapped, bite-sized candies in three flavors that are positioned as an everyday indulgence. To target female chocolate lovers, the company launched at private parties through House Party, a marketing company known for using viral marketing techniques to create word-of-mouth buzz. Hershey Food Corp.’s president and CEO David West recently told investors in a conference call that Bliss has “exceeded internal predictions,” and the company expected Bliss to “anchor the trade-up segment in 2009.”

This summer, the company added Reese’s Select Clusters, individually wrapped, turtle-like confections, to its line. The product is packaged in 8-oz. bags and retails for about $3.95. To spark trial, Rite Aid ran a promotion that offered consumers a free Clusters with the purchase of a Bliss product. Despite those strong launches, Hershey’s West said the premium chocolate part of the business was experiencing a slowdown in sales, although he was bullish on Starbuck’s Truffle holiday gift sales.

Holiday is a key time for premium chocolate sales, but if the predictions for other product categories are any indicator, consumers may even cut back on their chocolate consumption. “Although often described as recession proof, the current economic downturn has clipped premium chocolate’s traditionally stellar sales growth by as much as 50%,” said Packaged Facts’ Vreeland. He said that to generate sales, manufacturers were offering “pre-season” discounts and price discounting.

More aggressive pricing was evident at one Giant location in the Washington, D.C. area, where the supermarket chain promoted M&M Premiums and Dove Promises in a 2-for-$5 deal. Lindt Truffles were on sale at 2-for-$6. Target aggressively was promoting holiday non-premium chocolates; the mass retailer devoted floor displays in its holiday aisles to Hershey’s 18.6-oz. bags, priced at 2-for-$7.

Echeandia said she hasn’t seen a drastic increase in inserts or other coupons. “We haven’t seen more than normal. In fact, I think I’ve seen a bit less,” she said. “I think the premium brands will continue to be strong. Private label might work for mints or caramels, but when it comes to premium brands, people aren’t willing to compromise.”

“The trend we’re seeing today is for consumers’ desire for quality instead of quantity of chocolate,” said Mars’ Bowling. “Customers are interested in accessible indulgences. They are willing to spend more on products that satisfy their need for indulgence, convenience or health.”

Sen. Casey asks Weis for price-freeze on more than 2,400 products

WASHINGTON Sen. Bob Casey, D-Pa., on Monday drafted a letter to David Hepfinger, president and CEO of Weis Markets, praising the grocer for implementing a 90-day price freeze on more than 2,400 products.

“This decision shows an admirable commitment to helping your customers in communities across Pennsylvania and beyond who are finding it harder every day to make ends meet and put nutritious meals on their families tables,” Casey wrote. “Without being asked, Weis Markets has chosen to respond to this need with vision and compassion. Your actions to hold down food prices will give families greater access to the food staples they need and help them make ends meet.”

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